IG Says SEC May Have Been Lenient with 'Prominent Law Firm' Due to Claimed 'Significant Ties'

The Securities and Exchange Commission is investigating allegations that it may have been unduly lenient with an unidentified “prominent law firm” because of a revolving door between the agency and the legal shop, the Wall Street Journal (sub. req.) reports.

In a letter yesterday to Sen. Charles Grassley (R-Iowa), the SEC’s inspector general, David Kotz, wrote: “We are currently conducting an investigation of allegations very recently brought to our attention that a prominent law firm’s significant ties with the SEC, specifically, the prevalence of SEC attorneys leaving the agency to join this particular law firm, led to the SEC’s failure to take appropriate actions in a matter involving the law firm.”

The letter was in response to concerns raised by Grassley, who is the senior minority member of the Senate Finance Committee, that the SEC is too cozy with a number of the businesses for which it has regulatory oversight responsibilities because SEC employees are looking ahead to future job prospects with these companies as they do their work for the federal agency.

Observers are, of course, wondering what law firm he may be referring to, and, so far, it appears that the law firm hasn’t been identified. A subsequent Am Law Daily post discusses several law firms on which the SEC has previously focused a spotlight, but there were no claims by the SEC that these firms did anything wrong.

The Wall Street Journal Law Blog provides a copy of the IG letter (PDF) to Grassley.

Related coverage:

ABAJournal.com: “Some SEC Lawyers Change Sides Within Days of Leaving the Agency”

Updated at 6:45 p.m. to include information from subsequent Am Law Daily post.